A STUDY ON THE DETERMINANTS OF FRANCHISING IN KOREAN FOOD SERVICE INDUSTRY
- LanguageENG
- URLhttp://db.koreascholar.com/Article/Detail/271796
pp.1978-1979
Purpose This study, for the first time attempts to investigate the determinants of the Korean foodservice franchising employing various theories. In addition this study attempts to consider distinguishable foodservice characteristics such as the segment of foodservice and the market demand. This study expects to contribute to the theoretical underpinnings of the foodservice franchising by incorporating distinguishable foodservice characteristics to franchising theories. Method The sample for this study came from uniform franchise offering circular based on Korea Fair Trade Commission. There were 1,598 food service franchisors in uniform franchise offering circular 2009-2011 listing. However, 596 were excluded because of data irregularities remaining 1,002 available for sample. Based on the literature review, we choose seven determinants. The seven determinants were measured as follows. Firm age was measured as two proxy variables. One was measured as the years of franchising business. The other was measured as the years of business. Firm size was measured as total sales. Capital scarcity was measured as the ratio of total debt to total asset. Start-up costs were measured as initial investment. Monitoring costs were measured as the number of major cities franchised units operates. Royalty was measured as sales of a franchised unit. Finally, brand name was measured as advertising expenditures. Results The first proposition (firm age is related to the use of franchising) was supported by the signaling theory and the transaction costs theory instead of the resource scarcity theory. The age (measured as the years of franchising business) had a statistically significant positive relationship with the use of franchising. The second proposition (firm age is related to the use of franchising) was supported by the logic of the resource scarcity. The age (measured as the years of business) had a statistically significant negative relationship with the use of franchising. The third proposition (firm size is related to the use of franchising) was supported by the signaling theory instead of the resource scarcity theory. The firm size had a statistically significant positive relationship with the use of franchising. The fourth proposition (capital scarcity is related to the use of franchising) was not supported by the resource scarcity theory. The capital scarcity had not a statistically significant positive relationship with the use of franchising. The fifth proposition (start-up costs is related to the use of franchising) was not supported. The start-up costs had not a statistically significant either positive or negative relationship with the use of franchising. The sixth proposition (monitoring costs is related to the use of franchising) was supported by the agency theory. The monitoring costs had a statistically significant positive relationship with the use of franchising.. The seventh proposition (royalty is related to the use of franchising) was not supported by the agency theory. The royalty had not a statistically significant positive relationship with the use of franchising. The eighth proposition (brand name is related to the use of franchising) was not supported by the agency theory. Brand name had not a statistically significant negative relationship with the use of franchising. Conclusions Five propositions were found to be statistically significant from eight propositions. The four determinants such as firm age, firm size, monitoring costs, and brand name can affect the use of franchising for the foodservice industry in South Korea. Relating the significant propositions to the diverse theories, there was no one theory that dominated all propositions. The signaling theory was more appropriate for both firm age (the years of franchising business) and firm size while the transaction costs theory was more appropriate for age (the years of franchising business) as well. In addition, the resource scarcity theory was more appropriate for firm age (the years of business). Finally, the agency theory was appropriate for monitoring costs although this theory needed to be ameliorated for brand name.